Retirement freedoms 'rushed in'

Press Association
Retirement freedoms
Retirement freedoms

Savers trying to use the government's new retirement freedoms have been left frustrated because the measures were rushed in with an "unrealistic" timetable, the pensions industry has said.

The comments came after an investigation by the Daily Mail found people were facing high charges for withdrawals or for switching to rival firms, delays in paying out cash and having to pay up to £1,000 for financial advice if they want their money.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said it had raised concerns in 2014 when it became clear that the Government's timetable for implementing the reforms was "unrealistic".

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She said the legislation for the reforms was not completed until just 20 working days before they were due to start.

Ms Segars said: "With so little time to prepare it was always clear that, despite everyone's very best efforts, there would be a significant gap between the Government's ambition for these reforms on day one and the practical reality.

"Savers who wish to access their pension funds flexibly today may find they can't secure the products or advice they need at a price they want to pay - and that's understandably incredibly frustrating for them."

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But Pensions Minister Ros Altmann told BBC Radio 5 Live that it is "certainly not the case" that the reforms had been rushed through. She said the freedoms must be allowed time to bed in and "if things aren't working properly, we will take action".

She said: "Obviously it's disappointing that the industry, having had over a year to prepare for all of this, doesn't seem in many cases to have quite got its act together in the way that customers might have hoped."

The reforms, many of which were unveiled in the 2014 Budget, mean that instead of having to buy a retirement annuity with their pension pot, people can take their money how they wish, subject to tax.

Savers can also take their pot in one go, or in slices. But it is up to companies themselves to decide whether they want to offer the full range of new freedoms.

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The Daily Mail spoke to savers who were being asked to sign letters saying they had sought financial advice, and paying up to £1,000 for the privilege, while others said they had to wait 90 days to move their money to newer schemes so they could access it.

TUC general secretary Frances O'Grady said: "The Government was warned that rushing in so-called 'pension freedom' risked causing chaos in which savers would be the losers ...

"Savers must have access to good value, high quality retirement income options, not simply to be left alone to fend for themselves in a free-for-all."

The Association of British Insurers (ABI) said firms had been "working round the clock" to deal with the unprecedented levels of demand seen from customers since the new retirement freedoms came into force on April 6.

During the first month of the reforms, firms handled 1.13 million phone calls from people who were interested in the new freedoms - marking an 80% increase on normal levels.

Yvonne Braun, director of long term savings policy at the ABI, said: "While the vast majority of customers have been able to access their funds in full, some may be required to take advice as a result of the Government's rules because they have valuable guarantees."

Providers are encouraging people to contact the Government's free, impartial Pension Wise service so they can assess their options, she said.

Tom McPhail, head of pensions research at financial services firm Hargreaves Lansdown, said firms that cannot offer their customers the full freedoms should make sure they can leave and access the freedoms elsewhere with another company, he said, adding that transfer costs should be "no more than a nominal administration fee" and the process should take just a few days.

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He said: "Investors with these companies should be given the freedom to transfer their money elsewhere without having unnecessary barriers put in their way.

"Insisting that investors pay hefty exit penalties, use a financial adviser that some may not need, or jump through bureaucratic hoops is simply not reasonable or fair."

Mr McPhail also said that the Financial Conduct Authority (FCA) should clarify regulations around retirement income withdrawals.

An FCA spokeswoman said it is monitoring how firms are putting the changes into place and is talking to firms where issues have arisen.

Stephen Timms, Labour's acting shadow secretary of state for work and pensions, said: "It's completely unacceptable that so many people can't benefit from the new freedoms."

Speaking earlier this week, Prime Minister David Cameron said he will keep "a careful eye" on companies' treatment of pension savers.

Labour's Lord McFall of Alcluith, a former chairman of the Treasury select committee, has also said there were "rip-offs taking place daily" and called for people to be able to see exactly what they were being charged.

A Treasury spokeswoman said: "Our new pension reforms give people real freedom and choice over how they spend their hard-earned savings in retirement.

"It's great that many pension providers have risen to the challenge and are already offering their customers flexibility, but there are still some firms lagging behind.

"People should in no way be disadvantaged by this. That's why we've changed the law so people can transfer their savings to another provider, set up the free guidance service Pension Wise, and will monitor the progress of the reforms to ensure people can access their money as they want."

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